The Chinese Tech Crackdown, Take 2

On Tuesday, I ended my post with this:

At the moment, and that as a consequence of having written all of this out, this is where I find myself:
China is optimizing for power, and is willing to give up on innovation in the consumer internet space. America is optimizing for innovation in the consumer internet space, and is willing to cede power to big tech in terms of shaping up what society looks like in the near future.
Have I framed this correctly? If yes, what are the potential ramifications in China, the US and the rest of the world? What ought to be the follow-up questions? Why? Who else should I be following and reading to learn more about these issues?

https://econforeverybody.com/2021/07/27/the-three-article-problem/

How might I have been wrong? V Ananta Nageswaran and Nitin Pai wrote posts recently that helped me learn about some answers to at least the first of my questions above.

Let’s find out how I might have been wrong!


Noah Smith had hypothesized that the tech crackdown is because China’s goals are about asserting its power internationally. And not soft power, but the tanks and boots on the ground type power.

China may simply see things differently. It’s possible that the Chinese government has decided that the profits of companies like Alibaba and Tencent come more from rents than from actual value added — that they’re simply squatting on unproductive digital land, by exploiting first-mover advantage to capture strong network effects, or that the IP system is biased to favor these companies, or something like that. There are certainly those in America who believe that Facebook and Google produce little of value relative to the profit they rake in; maybe China’s leaders, for reasons that will remain forever opaque to us, have simply reached the same conclusion.

https://noahpinion.substack.com/p/why-is-china-smashing-its-tech-industry

Nitin Pai disagrees:

Now, it’s unclear if the opportunity costs of talent are so stark in China that the government must crack down on consumer internet companies in order to incentivise people to get into hardware. But Smith’s explanation is consistent with the popular view that China’s leaders are astute and inscrutable strategists who think really long term.
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My answer is simple: it’s about political power. In fact, if we frame the question differently, the answer becomes readily apparent: “Why is the autocratic leader of the Chinese Communist Party attacking media companies that directly reach almost everyone in the country?” Because size, reach and control of consumer data gives them narrative power comparable to what the Party has. Further, the ability to tap foreign capital gives them more freedom, albeit of the kind with Chinese characteristics. The Party doesn’t like that. And Xi likes it even less. That is why he moved aggressively to pre-empt a challenge to the Party’s narrative dominance and preserve its monopoly on power.

https://www.nitinpai.in/2021/07/27/why-china-is-attacking-its-consumer-internet-companies

Another way to think about it: it is about soft power, but the soft power that the CCP would like to project to its own people. There is only one storyteller that shapes the societal narrative in China, and anybody else who wants to play is going to be cut down to size. Ruthlessly.

(Of course, it is not just about soft power being projected to its own people. But nobody in China is crazy enough to want to play the hard power game with the CCP. That’s a well established monopoly. But Nitin is saying that the CCP wants all aspects of power to be within its complete control, soft and hard.)

As he puts it towards the end of his post:

It’s consistent with what it has been doing since Mao Zedong’s time: ruthlessly cutting down challenges to its hold on Chinese minds.
That’s it, folks. Nothing more to see here.

https://www.nitinpai.in/2021/07/27/why-china-is-attacking-its-consumer-internet-companies

Ananta Nageswaran also blogged about this yesterday:

In the meantime, a blog post by Noah Smith, an economics teacher and a (former?) columnist for Bloomberg wrote that China’s crackdown on consumer-internet companies was to ensure that China’s financial and intellectual resources were not diverted for creating low value addition. It did not strike him that such an explanation – if it were true – did not do any credit to China. It reeks of central planning and omniscience. Two, even if it were true and even if it was meant to be a benign explanation, malign explanations cannot be ruled and need not be ruled out.
Mutually exclusive explanations help keep the narrative simple and, two, it helps make the narrator appear smart because he/she has figured out the ultimate explanation. More often that not, reality is grey. Or, it has many shades.

https://thegoldstandardsite.wordpress.com/2021/07/28/fintech-edtech-and-china/

In other words, he’s saying that even if what Noah is saying makes sense, there is more to it than that. It’s not just the opportunity cost of having some of the best minds in China work on consumer tech. What else might it be? Ananta Nageswaran finds himself in agreement with Nitin Pai:

I agree. It is political power and the interpretation (of Xi and correctly so) that information (Nitin calls it mindshare) about people’s behaviour that these companies have give them the ability (and the chance) to set the narrative later, in Xi’s thinking, seizing it from the CCP.

https://thegoldstandardsite.wordpress.com/2021/07/28/fintech-edtech-and-china/

A minor point I would like to make here: I don’t think information and mindshare are the same thing, though they certainly are related. The information that tech firms have allows them to shape (sometimes in entirely unexpected ways!) the narrative, and therefore influence mindshare. Information is the tool and mindshare is the outcome – or at least, that is how I see it.

Please read Sanjay Anandram’s quotes from that blogpost too. I learnt about (and am going to shamelessly borrow) the RFRE principle.


So is it Noah’s story, or Nitin and Ananta Nageswaran’s? Regular readers know what’s coming next: the truth lies somewhere in the middle! Or at least, that’s my take, and it seems to be Ananta Nageswaran’s as well:

Of the three explanations that have been on offer, Noah Smith’s is the least persuasive. In some respects, Nitin and Sanjay are aligned and they diverge in some other aspects.
As always, the real motivation behind some of the recent decisions of the government in China will have elements of all three and more.

https://thegoldstandardsite.wordpress.com/2021/07/28/fintech-edtech-and-china/

To a student reading this: spectrum based thinking is a gift. Reasonable people can and should argue about where the truth lies, but always think intervals, never point estimates.

And having read all of the pieces that I have linked to across these two posts, I find myself in the same space on the spectrum as Ananta Nageswaran. That is, it’s not just the Noah Smith/Dan Wang argument at play (regarding which, Noah has updates. Scroll to the bottom of the post where he links to pieces that bolster his argument). But it is more about the CCP asserting its power.

Ananta Nagewaran ends with a Bruno Maçães quote: “the main players compete not under a common set of rules but in order to define what the rules are”.

It is a weird coincidence, but I just introduced some students to Frederich List yesterday. The more things change…

On Valuing Zomato, But Don’t Stop There

If you are a student of economics, you should be able to understand the basics of valuation. It is up to each one of us to determine our level of expertise, but at the very least, we should be able to understand valuations that others have arrived at.

And a great way to learn this is to devour, as greedily as possible, every single blog post written by Professor Aswath Damodaran.

Here’s an excerpt from his blogpost on valuing Zomato:

Eating out and prosperity don’t always go hand in hand, but you are more likely to eat out, as your discretionary income rises. Thus, it should come as no surprise that the number of restaurants increases with per capita GDP, and that one reason for the paucity of restaurants(and food delivery) in India is its low GDP, less than a fifth of per capital GDP in China and a fraction of per capital GDP in the US & EU.

http://aswathdamodaran.blogspot.com/2021/07/the-zomato-ipo-bet-on-big-markets-and.html

Read the whole thing, and if it is your first time reading about this topic, read it three times. I’m quite serious! Also download the spreadsheets, and play around with the assumptions in them. It is a great way to teach yourself Excel and valuations at the same time. Excel and valuations is also a great way to understand the concept of complementary goods, and I’m only half joking.


So, ok, you have now got a little bit of a grip on valuation. That’s great, but you shouldn’t stop there. Valuing a company is fine, but how does one think about the valuation of this company (Zomato) in the context of this sector (online food delivery)?

Here are some facts. Zomato raised $1.3 bn through an IPO which was oversubscribed 38 times and which valued it at $14.2 bn. At about the same time, its competitor Swiggy raised $1.25 bn in a Series J fund raise which gave it a post-money valuation of $5.5 bn.
The post-IPO public market price discovery of Zomato shows that Swiggy is 2.6 times under-valued.

https://gulzar05.blogspot.com/2021/07/some-observations-on-zomato-and-swiggy.html

Also from that post, a great way to understand how to start to think about the price one can get in the market. That is, you can learn all the theory you want about valuation, and pricing and what not. At the end of the day, the price you command in the market is about so much more than that:

4. But, if markets stay as frothy as it’s now, Swiggy’s promoters and investors need not worry. Unlike Zomato’s promoters who, judging from the first day pop left huge money on the table, Swiggy’s promoters could rake in much more by pricing its IPO closer to the comparator market price. Swiggy and other could benefit from the later mover advantage.
5. There appears to have been a first mover disadvantage for Zomato in leaving money at the table and not maximising its IPO takings. Conversely there may have been a first mover advantage for its investors in maximising their returns.

https://gulzar05.blogspot.com/2021/07/some-observations-on-zomato-and-swiggy.html

And you shouldn’t stop there either! Valuing a company is fine. Thinking about that company in the context of its competitors is great. Thinking about the IPO rush in the start-up world, and what it means in the context of the overall economy is fantastic.

The Indian startup scene has been set ablaze by the spectacular IPO of Zomato. In a largely conservative market this constitutes a huge collective leap of faith since the company has consistently made increasing losses and several questions hang on its profitability. With some more blockbuster IPOs lined up, the party is likely to go on for some time. Some high-profile boosters even think of it as a new dawn in risk capital raising. The problem is with those left standing when the party ends, as it must. And it’s most likely to be not pretty.

https://gulzar05.blogspot.com/2021/07/the-startup-ipo-bubble-reaches-india.html

The world’s unicorn herd is multiplying at a clip that is more rabbit-like. The number of such firms has grown from a dozen eight years ago to more than 750, worth a combined $2.4trn. In the first six months of 2021 technology startups raised nearly $300bn globally, almost as much as in the whole of 2020. That money helped add 136 new unicorns between April and June alone, a quarterly record, according to cb Insights, a data provider. Compared with the same period last year the number of funding rounds above $100m tripled, to 390. A lot of this helped fatten older members of the herd: all but four of the 34 that now boast valuations of $10bn or more have received new investments since the start of 2020.

https://www.economist.com/business/2021/07/19/technology-unicorns-are-growing-at-a-record-clip

Why is this happening now? Is it because of loose monetary policy the world over? Is it because of optimism about what the world will look like post-covid? Neither, and something else altogether? Or both and something else also? What might the ramifications be? How should that influence your thinking about the next three to five years in your life – when it comes to going abroad to study, or starting an MBA, or being in the job market?

Note the chain of thought in this blogpost: valuing a company, thinking about that specific sector, thinking about IPO’s in general, thinking about the overall economy… and getting all of that back to your life. Apply this to all of the news you read, everyday, and you’ll soon start to build your own little picture of the world. That is, you’ll start to see the world like an economist. And trust me, that is a superpower. 🙂

The Three Article Problem

I’ve been mulling over three separate columns/posts/interviews over the past few days. Today’s post was supposed to be me reflecting on my thoughts about all of them together, but as it turns out, I have more questions than I do thoughts.

Worse (or if you think like I do, better) I don’t even have a framework to go through these questions in my own head. That is to say, I do not have a mental model that helps me think about which questions to ask first, and which later, and why.

So this is not me copping out from writing today’s post. This is me asking all of you for help. What framework should I be using to think about these three pieces of content together?

All three posts revolve around technology, and two are about the Chinese tech crackdown. Two are about innovation in tech and America. And one of the three is, obviously, the intersection set.


The first is a write-up from Noah Smith’s Substack (which you should read, and if you can afford it, pay for. Note that I am well over my budget for subscribing to content for this year, so I don’t. But based on what I have read of his free posts, I have no hesitation in recommending it to you.)

In other words, the crackdown on China’s internet industry seems to be part of the country’s emerging national industrial policy. Instead of simply letting local governments throw resources at whatever they think will produce rapid growth (the strategy in the 90s and early 00s), China’s top leaders are now trying to direct the country’s industrial mix toward what they think will serve the nation as a whole.
And what do they think will serve the nation as a whole? My guess is: Power. Geopolitical and military power for the People’s Republic of China, relative to its rival nations.
If you’re going to fight a cold war or a hot war against the U.S. or Japan or India or whoever, you need a bunch of military hardware. That means you need materials, engines, fuel, engineering and design, and so on. You also need chips to run that hardware, because military tech is increasingly software-driven. And of course you need firmware as well. You’ll also need surveillance capability, for keeping an eye on your opponents, for any attempts you make to destabilize them, and for maintaining social control in case they try to destabilize you.

https://noahpinion.substack.com/p/why-is-china-smashing-its-tech-industry

As always, read the whole thing. But in particular, read his excerpts from Dan Wang’s letters from 2019 and 2020. It goes without saying that you should subscribe to Dan Wang’s annual letters (here are past EFE posts that mention Dan Wang). As Noah Smith says, China is optimizing for power, and is willing to pay for it by sacrificing, at least in part, the “consumer internet”.

That makes sense, in the sense that I understand the argument.


The second is an excellent column in the Economist, from its business section. Schumpeter is a column worth reading almost always, but this edition in particular was really thought-provoking. The column starts off by comparing how China and the United States of America are dealing with the influence of “big” technology firms.

As the column says, when it comes to the following:

  1. The speed with which China has dealt with the problem
  2. The scope of its tech crackdown
  3. The harshness of the punishments (fines is just one part of the Chinese government’s arsenal)

… China has America beat hollow. As Noah Smith argues, China is optimizing for power, and has done so for ages. As he mentions elsewhere in his essay, “in classic CCP fashion, it was time to smash”. Well, they have.

But the concluding paragraph of the Schumpeter column is worth savoring in full, and over multiple mugs of coffee:

But autarky carries its own risks. Already, Chinese tech darlings are cancelling plans to issue shares in America, derailing a gravy train that allowed Chinese firms listed there to reach a market value of nearly $2trn. The techlash also risks stifling the animal spirits that make China a hotbed of innovation. Ironically, at just the moment China is applying water torture to its tech giants, both it and America are seeing a flurry of digital competition, as incumbents invade each other’s turf and are taken on by new challengers. It is a time for encouragement, not crackdowns. Instead of tearing down the tech giants, American trustbusters should strengthen what has always served the country best: free markets, rule of law and due process. That is the one lesson America can teach China. It is the most important lesson of all.

https://www.economist.com/business/2021/07/24/china-offers-a-masterclass-in-how-to-humble-big-tech-right

This makes sense, in the sense that I understand the argument being made. Given what little I understand of economics and how the world works, I am in complete agreement with the idea being espoused.


The third is an interview of Mark Zuckerberg by Casey Newton of the Verge.

It is a difficult interview to read, and it is also a great argument for why we should all read more science fiction (note that the title of today’s post is a little bit meta, and that in more ways than one). Read books by Neal Stephenson. Listen to his conversation with Tyler Cowen. Read these essays by Matthew Ball.

Towards the end of the interview, Casey Newton asks Mark Zuckerberg about the role of the government, and the importance of public spaces, in the metaverse. Don’t worry right now if the concept of the metaverse seems a little abstract. Twenty years ago, driverless cars and small devices that could stream for you all of the world’s content (ever produced) also seemed a little abstract. Techno-optimism is great, I heavily recommend it to you.

Here is Mark Zuckerberg’s answer:

I certainly think that there should be public spaces. I think that’s important for having healthy communities and a healthy sphere. And I think that those spaces range from things that are government-built or administered, to nonprofits, which I guess are technically private, but are operating in the public interest without a profit goal. So you think about things like Wikipedia, which I think is really like a public good, even though it’s run by a nonprofit, not a government.
One of the things that I’ve been thinking about a lot is: there are a set of big technology problems today that, it’s almost like 50 years ago the government, I guess I’m talking about the US government here specifically, would have invested a ton in building out these things. But now in this country, that’s not quite how it’s working. Instead, you have a number of Big Tech companies or big companies that are investing in building out this infrastructure. And I don’t know, maybe that’s the right way for it to work. When 5G is rolled out, it’s tough for a startup to really go fund the tens of billions of dollars of infrastructure to go do that. So, you have Verizon and AT&T and T-Mobile do it, and that’s pretty good, I guess.
But there are a bunch of big technology problems, [like] defining augmented and virtual reality in this overall metaverse vision. I think that that’s going to be a problem that is going to require tens of billions of dollars of research, but should unlock hundreds of billions of dollars of value or more. I think that there are things like self-driving cars, which seems like it’s turning out to be pretty close to AI-complete; needing to almost solve a lot of different aspects of AI to really fully solve that. So that’s just a massive problem in terms of investment. And some of the aspects around space exploration. Disease research is still one that our government does a lot in.
But I do wonder, especially when we look at China, for example, which does invest a lot directly in these spaces, how that is kind of setting this up to go over time. But look, in the absence of that, yeah, I do think having public spaces is a healthy part of communities. And you’re going to have creators and developers with all different motivations, even on the mobile internet and internet today, you have a lot of people who are interested in doing public-good work. Even if they’re not directly funded by the government to do that. And I think that certainly, you’re going to have a lot of that here as well.
But yeah, I do think that there is this long-term question where, as a society, we should want a very large amount of capital and our most talented technical people working on these futuristic problems, to lead and innovate in these spaces. And I think that there probably is a little bit more of a balance of space, where some of this could come from government, but I think startups and the open-source community and the creator economy is going to fill in a huge amount of this as well.

https://www.theverge.com/22588022/mark-zuckerberg-facebook-ceo-metaverse-interview

I think he’s saying that the truth lies somewhere in the middle, and god knows I’m sympathetic to that argument. But who decides where in the middle? Who determines the breadth of this spectrum, governments or businesses? With what objective, over what time horizon, and with what opportunity costs?


At the moment, and that as a consequence of having written all of this out, this is where I find myself:

China is optimizing for power, and is willing to give up on innovation in the consumer internet space. America is optimizing for innovation in the consumer internet space, and is willing to cede power to big tech in terms of shaping up what society looks like in the near future.

Have I framed this correctly? If yes, what are the potential ramifications in China, the US and the rest of the world? What ought to be the follow-up questions? Why? Who else should I be following and reading to learn more about these issues?

I don’t have the answers to these questions, and would appreciate the help.

Thank you!

Food, by Krish Ashok

If you’re coming cross this thread for the first time, I envy you. Scroll up to the top, and drool your way through 🙂

Please read his book, Masala Lab, if you haven’t read it yet.

On Networking

It’s a question I get quite often: can you teach me about how to network better?

  1. I actually don’t network all that well. I suck at small talk, for starters. I’m never sure of what to do when I walk into a large gathering. My preferred thing to do at large parties is to seek out a person I’m comfortable with, and chat with that person for as long as possible. So if that is the kind of networking you have in mind, I’m not the guy to ask.
  2. But reaching out to folks to ask for help, I have a lot of experience in. I’ve been doing it for years, and will do it for life. Unashamedly, unabashedly. That I can speak about, since I have skin in the game.
  3. “Life is a non-zero sum game” is an axiom for me. So if somebody asks me for help, I will always try to help. I’d advise you to do the same. And that is a good way to start building out your network: help other folks when they ask you for it. Two advantages, one personal, one societal.
    1. Of course that person is likelier to help you when you reach out to them for help. You can, Vito Corleone style1, call in favors, even years down the line.
    2. But at the margin, that person is also likelier to pay it forward. That is, there is a non-zero chance that the person you helped will in turn help other folks who ask that person for help. If your ultimate aim is to build a society that is more willing to help each other to learn (as mine is), help others as much as possible. And you can call that networking, if you like. 🙂
  4. But that is the larger point about networking. I think most people have “how can I get others to help me?” in mind when they want to get better at networking. And sure, that’s very much a part of it.
  5. But it cuts both ways, no? I think it makes sense to first ask “How can I help others?”, before asking others for their help. Exports matter as much as imports!
  6. And a college student (my primary target audience on this blog) might well say, “But what can I help them with? They have so much more experience and knowledge than me!”
    1. True, for the most part. Not always, mind you, but I get the merits of that argument.
    2. But can you help somebody else? Can you help your juniors learn better? Can you help your neighbor’s schoolkids out with a project? Can you put out blogposts regularly that other folks may eventually read?
  7. If at least a part of your personal mission in life is to help other people, you will be that much more confident in asking others for help. Because you’re not asking for help only for yourself to get a job (for example), but through the help you’re receiving, others are benefitting too.
  8. The bottom-line is this: networking isn’t just about asking how to get others to help you. It is also about asking how you might help others. And doing the latter first makes it much easier to ask for the former.
  9. One final point: it is of course still entirely possible that the person you’ve asked for help will say no. They’re not doing it because they don’t like you, or your work. It is because they have commitments of their own, and honestly and really don’t have the time.
  10. Which is fine! There’s seven billion of us out there, you can always find someone else 🙂

Previous posts on EFE that have mentioned networking.

  1. don’t take that analogy too far, please![]

Should social media ban political parties?

I came to this interesting article via Mostly Economics:

In many countries, Facebook is one of the few alternatives to the government-aligned outlets that dominate national media ecosystems. That is why authorities have devoted so many resources to manipulating it, and why the company must take responsibility for stopping them.

https://www.project-syndicate.org/commentary/facebook-ban-trump-world-leaders-by-courtney-c-radsch-2021-07

Which led me to ask myself this question: what are the long term costs and benefits of having political parties on social media, and whether it makes sense to ban them from being on it?


  1. In these politically charged times, disclaimers might be a good way to start. This is not about Trump and Facebook, which is what the article I excerpted from is about. Nor is it about Twitter and the Indian government. It is about, more broadly speaking, the separation of societal discourse from discourse led by, shaped by and manipulated by, political parties. All political parties from all nations across all social media platforms.
  2. What is the aim of political parties on social media? Are they playing the non-zero game of asking what is best for their country (and preferably the world)? Or are they playing the zero-sum game of showing how the other side is wrong?
  3. Do they lead by example in terms of what societal discourse ought to be like? I know what my answer is to this question. If yours is yes, and you are willing to engage in a conversation, I would love to learn why my answer is wrong.
  4. My utopian societal discourse is one in which I take the help of others to learn what is best. And I hope to do this by improving my own knowledge and thinking, by conversing with others.
  5. Perhaps I’m too cynical when I say this, but this is not the aim of any political party on any social media platform. The aim of any political party on any social media platform is to prove “The Other” wrong. More, to insist that glory for your tribe/state/nation is all that matters. Still more, to insist that this glorious destination can only be reached via supporting “Us”, not “The Other”.
  6. Political parties play the zero sum game on social media. And we get sucked into playing that game ourselves.
  7. They’re not the root cause of the state of societal discourse, to be clear. But have they made the problem worse? Maybe I’m blinkered in my view, but I fail to see how this is not the case.
  8. The devil, as always, lies in the details. Are representatives of political parties to be allowed? If yes, are they free to make political statements? Who decides? This is not, I’m very aware, a very practical solution to the problem I’m highlighting. But I’ll make two final points.
  9. I’d much rather have this conversation than a debate on whether America should rein in Facebook, and whether India should ban Twitter, or any other match the following of your choice.
  10. If the two alternatives given to me are a country without social media of my choice, OR social media of my choice without political parties’ handles on it, I’m going with the latter.
  11. The truth lies somewhere in the middle. But maybe there’s merit in approaching the middle from this side of the spectrum rather than that one? (Yes, I know, third point. But this is my platform, and therefore my choice.)

Hajjar Awesome!

The phrasing of the title is because of English August, a book I read long ago, and still remember very fondly. And it’s sort of a pat on the back for myself because I completed a thousand posts on EFE. Well, strictly speaking this is post number 1003, but let’s round it off to an even thousand today.

My friends and colleagues, past and present, will be happy to confirm that there are few folks lazier than me, and I’ll happily admit to it myself. Which is all the more reason to celebrate this, because to keep this going for a thousand posts over five years is an achievement of sorts for me.

We started this blog on a whim sometime in June 2016, my wife and I, without having a very clear idea about what was to come of it. I started off, as I almost always do, with a large amount of enthusiasm, and as with everything else I do, said enthusiasm petered out soon enough. But since June 2018, I’ve been fairly regular, averaging about a post a day.

There have been periods of radio silence last year, and the reason is that I went through extended bouts of “but what is the point?”. Not jus the point of writing on the blog, but doing anything at all. It was that kind of a year, and I will not beat myself up over feeling that way, and about breaking my streak. Excreta, as the poet says, happens.

And there have been periods of radio silence this year too, but the second wave was devastating for all of us. We have all suffered losses, immediate family or extended. But for all of our sakes, let’s not dwell on that anymore. We’ve all had enough of it.


What have I learnt from writing these thousand posts?

  1. As David Perell pointed out on Twitter recently (as have others), if you take care of the quantity, the quality will take care of itself. Some of my posts have been atrociously bad, some have been about me trying to find my voice, and a lot have been of fairly middling quality, at best. But there are some that I am genuinely proud of, and remember very fondly indeed.
    ..
    ..
    My learning has been to show up (almost) everyday, without fail. It doesn’t matter if people read what I have written or not, comment or not, share or not. The writing is its own reward. I may have said this before on these pages, but if you’re a student reading this, please: write. Or make videos, or Instagram posts (or stories, or whatever one calls it), or tweet, or make a podcast. But put your work out there, and that regularly. Trust me, it does wonders for you.
    ..
    ..
  2. I haven’t bothered with measuring anything. I don’t add identifiers to outbound links, I haven’t installed Google Analytics, I don’t do affiliate links, and I don’t advertise anywhere. I try to respond to whatever comments folks put up, whether here on the blog, or on LinkedIn and Twitter. If you have written a comment and I have not responded, my apologies! I have also automated the sharing of these posts on Facebook, but I (quite literally) haven’t logged in to Facebook in years.
    ..
    ..
    My learning has been that quantifying stuff is strictly optional. I write everyday (well, almost), and even that is not a measure or a requirement. It’s a choice. Who is reading this, is the readership going up over time, which social media site drives the most traffic to my website – I don’t know any of this. And it doesn’t really matter. I just write.
    ..
    ..
  3. Writing these thousand posts has made me painfully aware of how little I know. Nassim Taleb has made famous the concept of the anti-library, and in that sense, writing on this blog is a daily reminder of how much remains to be read, learnt and written about.
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    My learning is that writing is a humbling experience, and that becomes truer the more you do it. And that’s a good thing! Think of it this way, you don’t write to show how much you know. You write to understand how much there remains to be learnt.
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  4. I don’t schedule my posts too much in advance. The most I’ve ever managed is a couple of weeks or so, and that because I was due to go on vacation. Otherwise (and this includes today) it is a case of get up, arm yourself with coffee, and think about what to write. That has its disadvantages, because an unmarinated blogpost doesn’t acquire the depth of flavour it could have otherwise. But it also has its advantages, because I am the kind of person who works best when panicking a little bit about upcoming deadlines.
    ..
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    My learning is that habit formation is a real thing, not just management speak. If you do something for long enough, it becomes a habit, but better – it becomes a habit you’re unwilling to break. And you end up finding the time one way or the other to keep at it. And that, in and of itself, is worth it.
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  5. The more I write, the more I remember stuff I’ve written. This is not a statistically valid observation, and I haven’t analyzed it, but I do think that I increasingly link to posts I’ve written earlier. I don’t say this to show how much I’ve written in the past, but to explain that I’m able to “connect the dots” better. I now understand better how what I’m writing about today can be thought of as an aspect of something I’ve written about earlier (or vice versa). My understanding of the world, such as it is, is definitely better than it was earlier. That’s a healthy profit right there!
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    My learning has been that writing is a way of teaching myself to think, to see the larger picture, and to make connections between topics that I would not have otherwise. And for that reason, I highly recommend it. It is not for me to say if I have become a better writer. That is for others to judge. But I can think better for having written these posts, that I feel (mostly) certain about.
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  6. I wanted to celebrate the thousand posts by coming up with a book based on on what I would have called some of my best work here. I even spoke about this with some of my friends and students, all of whom were very kind with their encouragement. But on reflection, the “could’ve been a blogpost instead” argument was much too strong to go up against. A book ought to be a book, not a vanity project.
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    But spinoffs is a good idea, I think. And for that I would like your help. What can I do more of? Less of? Add a weekly podcast that reflects in greater detail on what I’ve written that week? I’ll happily admit to not having the faintest idea about where I’ll find the time, but that’s one possibility. A day of the week dedicated to book reviews? God knows it’ll force me to read more books, and get better at writing about them. What else? Please send in your suggestions, and I really do mean that.
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  7. I don’t have any desire to turn this into a newsletter (Substack, or Revue, or anything else). One, because I’m lazy. I can’t bear to think about the nightmare of moving over into another system and all of what that entails. Plus, WordPress, which is where this is hosted, is just fine by me. Except for the new block editor style they have. I loathe it, and it is far too buggy for my liking. But I’ve gotten used to it now, and I’ve quite literally adopted the way I write to its idiosyncrasies, so why invest in changing now? (You want examples? Those little “..” signs that you see throughout this post are there because I don’t know how to introduce spacing between points otherwise. Pah.)
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  8. I cannot tell you about the number of people I have gotten a chance to meet and work with as a direct consequence of this blog. Students, professors, folks from the corporate world, people who work in think tanks, research organizations, and more besides. I often tell students that putting your work out there is a great way to build out your network, and I don’t say that without basis. It quite really is true. That ought not to be the reason to write, but it is a positive externality spillover, and a very welcome one. I’ve built my community as a consequence of writing this blog, and I am very thankful for it.
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  9. There are opportunity costs, of course. Those never go away.
    1. Maybe I could have written more academic papers? I don’t necessarily want to, and I’ll explain why in a blogpost one day, but I certainly could have.
    2. Maybe I could have read more books? This one hurts, because I really could have, and I really would have wanted to. But I think the takeaway is becoming better at time management. In other words, do both, but sacrifice something else in my day. Meetings. I would love to “sacrifice” meetings.
    3. Made more podcasts? Learnt a new skill? Made more videos? Traveled more? Again, I think the answer lies in learning how to get better at becoming more productive.
    4. So a promise to myself (and I’m old enough, and perhaps cynical enough, to already come to terms with the fact that I’ll probably end up breaking it): read more books, create more podcasts, make more videos, and attend less meetings.
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  10. Thank you for reading! I hope to do this for years to come, and I’m grateful that you have chosen to read whatever it is that I put out on these pages. If you have any feedback or suggestions for me, I would love to hear it. Again, thank you very, very, much 🙂

Can Undergraduates Be Taught To Think Like Economists?

The title of today’s blogpost has been copied, word for word, from a blogpost I had linked to earlier (the fifth link in this post).

It’s been about two and a half years since I read that post. I would still like to believe that Deirdre McCloskey was wrong, and that you can too teach undergraduates to think like economists. But well, perhaps the truth lies somewhere in the middle.


A common goal for principles of economics courses is to teach students to “think like economists.” I’ve always been a little skeptical of that high-sounding goal. It seems like a lot to accomplish in a semester or two.

https://conversableeconomist.blogspot.com/2019/03/can-undergraduates-be-taught-to-think.html

Both Tim Taylor and Deirdre McCloskey (whose essay I excerpt from below) aren’t saying that you can’t teach economics to undergraduates. You most certainly can, and you don’t need to run a fancy-pants model to ascertain this. What they are saying, however, is that it is one thing to teach them the principles of economics. It is quite another to teach them to apply these principles in their lives, at all times.

Bower thinks that we can teach economics to undergraduates. I disagree. I have concluded reluctantly, after ruminating on it for a long me, that we can’t. We can teach about economics, which is a good thing. The undergraduate program in English literature teaches about literature, not how to do it. No one complains, or should. The undergraduate program in art history teaches about painting, not how to do it. I claim the case of economics is similar. Majoring in economics can teach about economics, but not how to do it…. (Emphasis added)

http://www.deirdremccloskey.com/docs/graham/natural.pdf

It is one thing to teach opportunity costs. And most students we’ve taught will tell you the definition. The “good” students will tell you three different definitions, from three different textbooks, and maybe cite a couple of academic papers that ruminate about what the definition means. Well, great. Do these students apply the concept of opportunity costs in their daily lives? Do they ask themselves if this (whatever this may be) is the best use of their time, and what are they giving up in order to do this?

Does winning matter more than learning? Does winning matter more than doing? If you end up defeating somebody else – a person, a team, a tribe, a party or a nation – what do you gain? And to go back to the previous paragraph, was it but a Pyrrhic victory?


Consider this hypothetical:

Let’s say there’s two teams in some corporate environment somewhere. And for whatever reason, these teams don’t get along well together. Both sides believe that they’re in the right, and the other side is in the wrong, and we’ve reached Mark Twain territory.

Are they going to go to their manager(s) and ask them to resolve this issue? Sure, it may seem like a good idea initially. But said managers, I can assure you, have things to do. Deliverables to, well, deliver. Teams to manage. Projects to initiate. Other people to manage. And so the manager(s) might listen to both teams long list of complaints once, perhaps twice.

But eventually the price mechanism will come to the party. The more the two teams spend time on this, rather than on work, the more expensive the situation becomes for the enterprise. Because a commodity that is limited (time) is being spent on non-productive work (productive, in this case, can be thought of as remunerative).

Since the whole point of the firm’s existence is to maximize revenue, this will not be tolerated for too long. The manager(s) will eventually say one of the following:

  1. Figure it out yourselves, but get the work done, for that’s what matters. Or else.
  2. Let’s reallocate, forcibly, both teams on to other projects. This will usually be accompanied with a mental note to themselves that truly important projects in the future should not be given to these team members. For obvious reasons.
  3. Or let’s shut down the project, because the point of a firm is to do the work that earns one the money. Start something new, with a new set of people.
  4. Now, since the team members are old enough to know that eventually pts 1 to 3 will occur, they usually swallow their differences and get the work done. Sure, bitching about the other team will happen in bars and pubs in the evening, and sure the other team won’t be called home for dinner anytime soon. But in the workplace, professionalism will win out, due to the price mechanism. In more explicit terms, they will get the work done because they know that otherwise they will be fired.

The reason all of this will happen is because these team members will have families, responsibilities, loans to pay off. The money they will lose out on by losing their jobs is far too important, and the threat of losing out on their income forces them to behave professionally.

The opportunity cost argument comes into play. Playing politics may be good for your ego, but it ain’t good for your wallet. But that lesson comes with age, it doesn’t come from attending principles of economics classes.

A nineteen-year old has intimations of immortality, comes directly from a socialized economy (called a family), and has no feel on his pulse for those tragedies of adult life that economists call scarcity and choice. You can teach a nineteen-year old all the math he can grasp, all the history he can read, all the Latin he can stand. But you cannot teach him a philosophical subject. For that he has to be, say twenty-five, or better, forty-five. …

http://www.deirdremccloskey.com/docs/graham/natural.pdf

Adults don’t necessarily grasp the argument that the opportunity cost of politics is work. But they understand the rules of the game called life. They do understand that the opportunity cost of politics is an increase in the probability of losing their wages. And so they still practice politics, but more covertly. Not, in other words, an ideal situation if the system is trying to optimize work, but hey, better than overt politics.

How to get students to understand that the opportunity cost of politics is learning? That the opportunity cost of politics is not getting fun projects done? That the opportunity cost of resolving arguments, or adjudicating who said what to whom and when is not being able to start other fun learning based projects? There’s no price mechanism at play, there’s illusions of immortality (they don’t get that time is limited), they don’t have the responsibility of putting food on the table (they come from a socialized economy called a family), and they haven’t experienced the tragedies of adult life.

To them, winning a political argument against the other side is the best use of their time.


Principles of economics, if taught well, and if learnt well, should in theory help you understand that the opportunity cost of politics is work. Philosophy should in theory teach you that good work is better than bad politics.

I’ll say this much: I was convinced that Deirdre McCloskey was wrong when she said that you couldn’t have undergraduates do economics, even if we taught them economics.

Now?

I hope.

Arbitrage and Writing

Here are excerpts from two newsletters that you should consider signing up for if you are a student of economics:

In late June, the Reserve Bank of India (RBI), India’s central bank and the banker to the banks, released the household financial debt figures based on select financial indicators. Household financial debt is basically loans that you and I have taken from the formal financial system of the banks (both commercial and cooperative) and the non-banking finance companies (NBFCs).
Of course, there are other ways to borrow as well. One can borrow against gold as a collateral from a local jeweller or simply borrow from a local money lender or borrow money from friends and family, which is why, the RBI calls it household financial debt based on select indicators.
It needs to be kept in mind here that borrowing from the informal sources is perhaps easier but at the same time more expensive, given that the risk for those lending money is higher.
So, what does the RBI data tell us? In absolute terms, the total household financial debt based on select indicators has gone up from Rs 55.38 lakh crore to Rs 73.13 lakh crore, between June 2018 and December 2020.

https://www.livemint.com/mint-top-newsletter/easynomics09072021.html

That is from Vivek Kaul’s (relatively) new newsletter, Easynomics. It is written in Vivek’s trademark style: easy to read, gloriously simple sentences (which is hard to do!), and sprinkled with just enough additional information to keep you engaged as you read through his main points. In short, really, really well done.

Here’s an excerpt from the second newsletter:

Despite this, it is unreasonable to expect that the government will reduce tax on these two fuels. Why? Sample this: excise duties on petrol and diesel accounted for a whopping 28 per cent of the central government’s tax revenue last year. Which government would let such a bounty slip by, especially when the country’s economic recovery is fragile? Think about it.
And, unlike income tax and goods and services tax, which entail a collection cost, oil marketing companies just have to do a simple RTGS transaction to pay the fuel tax they collect from us to the government! The government then uses the money for a range of welfare schemes.

https://businessstandard.substack.com/p/a-litre-of-petrol-takes-up-30-of

You and I may have our own personal opinions about which of these are better to read, but that’s not the point of this blogpost. The point of this blogpost is to point out that both writers have created simple, easy to understand posts about aspects of the Indian economy that matter to the common Indian citizen.

And they have done this by taking data from government websites. This data, as I have discussed here before, is not always easy to acquire. But those of us who have done the hard work of understanding how it is captured, where it is stored, when it is released, and how to go about making it analyzable1, have an advantage over those of us who remain blissfully unaware of all this.

But those of us who are blissfully unaware wouldn’t mind reading about the implications of this data, only if somebody were to take the time and effort to acquire that data and write simple, useful takeaways about it.

In finance, this is called arbitrage:

In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices at which the unit is traded. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. For example, an arbitrage opportunity is present when there is the possibility to instantaneously buy something for a low price and sell it for a higher price. (Emphasis added)

https://en.wikipedia.org/wiki/Arbitrage

If you are an economics student, and you know where all this data hides, and you know enough about how this data impacts the daily lives of citizens, and you want to get better at communication, there is riskless profit to be made. Get the data, analyze it, write about it, and give it away for free.

You learn the art and skill of of acquiring this data, you learn the art and skill of analyzing it, you learn the art and skill of writing about it (and you only get better over time, so don’t worry if the first few pieces aren’t “great”). You get to publish stuff that you can put on your CV – in fact, as I am fond of saying, it has the power to quite literally become your CV. Folks get to read what you’ve written, and they therefore understand our field and its implications in their lives a little bit better.

Nobody loses out, and we all win!

And when that great and glorious day arrives, and governments in India acknowledge that the way they make data available to its citizens is crappy, you have the ability to write a series of posts about exactly how the government could do a better job in this regard.

Learn how to work with data if you are a student of economics in India, and then write about it.

It’s a great form of arbitrage.

  1. what an utterly horrible word![]

Professor Nigam’s Twitter Thread on the AIU

Professor Nigam is the registrar at NLSIU, and he was kind enough to read my series of posts on the Almost Ideal University. What’s more, he took the time to respond with a very thoughtful series of tweets, as a part of his excellent series that is freely available on Twitter. I don’t know if he has a name for it, I think of it as the “My Dear Law Students” series.

If you are a student of law, the series ought to be mandatory reading. If you are a student of writing, the series ought to be mandatory reading. I’m quite serious, please do read all of them!

In this post, I’m going to cite some of his tweets, and add my two penn’orth.


And nor will students of economics be able to demonstrate real world potential unless assisted by real economists. You learn best when taught by folks with skin in the game. In my Almost Ideal University, you can’t become a teacher without having worked in the field first. And that’s a non-negotiable requirement.

Yes, of course there are problems with this. Why will folks want to leave a corporate job? Won’t the pay be lesser in academia? Why would firms be ok with having folks just “go away” for six months to teach? All great questions, and valid ones. But that’s exactly what we need to figure out if we’re going to ever get around to building out the AIU.

These problems arise, of course, only because I am in complete agreement with Professor Nigam when he says that you need people with skin in the game.

And I’d much rather solve these (much harder) problems than solve the problem of how to make three hour long in-class theoretical exams more relevant.


The equitable access problem is a real one, and I’ll state upfront that I do not really know how to solve it. Technology can help to an extent, but the AIU won’t be equitable to begin with. Yes, replicability, if it works out, will help. But it won’t ever be a perfectly equitable system. My sole defense is that the system I seek to replace is, if anything, even more inequitable.

Not, I hasten to add, that this should mean that we stop worrying about equitable access in the case of the AIU!

And regarding the second tweet in this section, yes, bureaucracy is inevitable. But if gamified well, there is a chance that the system (again, while not being perfect) will be better than the status quo.

My point is this: if we can get students to view assignments as something to work on cooperatively rather than combatively, the need to monitor is that much lesser. Of course, the need to mentor is that much higher, but isn’t that the point of education in the first place?

But yes, those of us in academia will need to figure out how to make this happen, and as Professor Nigam has pointed out, that with the help of working professionals.

There’s a great deal of detailing to be worked out here, and apprenticeships, mentorships and professionals in residence on campus will all have a role to play. Again: a hard problem to solve, but attempting to solve for this is a worthy mission as an academician.


I wish I could do a better job of writing more clearly, and the fault is mine over here. In my AIU, the onus isn’t on the student to attend. The onus is on the professor to make the class interesting enough to attend. The student is always free to not attend, but the professor should be good enough to make the student feel regret at not being present in class. Specifically:

  1. The professor should have the ability to not just explain a particular student’s doubt, but also in the process enrich everybody else’s understanding of that issue.
  2. The professor (or their assistant, perhaps) should allow the most non-intuitive doubts to filter up in class. That is, study groups, whether offline or on (say) Discord servers will allow the students themselves to resolve the relatively easier doubts. Those that prove resilient will be handled by the professor. Will it work perfectly right from the get-go? Of course not. Is it worth trying? I vote yes – but of course, as they say, your mileage may vary.
  3. So, no, not a diminishing role for physical classroom instruction at all. Au contraire, a role of paramount importance for the physical classroom, for synthesis will happen there. And perhaps can only happen there, but that takes us into deep waters for a blogpost. And on a related note, the more you agree with me over here, the more you should worry about inequities across the entire system. For obviously, physical classroom sessions can’t scale.

A rare area of disagreement for me in this Twitter thread, for I do have a lot of confidence in the motivational levels of undergraduates. Not all undergraduates, I should be clear. As with everything else in life, so also with motivational levels of undergrads: there will be a distribution. Some will be very motivated, and will remain so no matter how bad college is. At the other end of the distribution, some will remain very unmotivated, no matter what how good college is.

But that being said, it is true that I prefer to award the benefit of the doubt to the student. This is in good humor, Professor Nigam, and please do forgive me my impertinence, but innocent until proven guilty! Or in this case (and is it the same thing?) motivated until proven otherwise. 🙂

But quite honestly, and I’m no longer joking around, I very strongly believe that the enthusiasm to learn is systematically sucked out of a student with every passing year in academia. The more years you spend in the system, the more likely it is that you will want to not learn. This is not a universal law, but in my experience, it has been a fairly accurate heuristic.

Will there be students who will abuse the system I propose? Absolutely. That is the nature of a distribution.

Do more students suffer today for being made to mandatorily sit through classes that just aren’t good enough? Absolutely, and I would rather avoid this than the former.


Completely agreed!

I could get into one of my classes, as a hypothetical, a retired bureaucrat who has impeccable knowledge of how the Union Budget takes shape over the course of the financial year in India. This hypothetical bureaucrat has forgotten more about the budgetary process than any of us will ever know. Unfortunately, watching paint dry is more entertaining than listening to this person speak.

We’ve all met folks like these: really, really good experts, but really, really bad communicators. And that’s fine! Their job wasn’t to be good communicators. It then becomes my job as the teacher in that class to make it more interesting. Maybe I interview the bureaucrat, rather than have him speak? Maybe I record the interview and play snippets? Maybe I speak offline with him, and then conduct I class based on that conversation?

But yes, we absolutely need great teachers to make the subjects accessible and enjoyable.


It’s a great question, and I wish I had an answer, but I don’t. As I said in my first post on the AIU:

I’m a big believer in the fact that students should have skin in the game, and therefore I think that a price should be paid for acquiring an education. But I’m also all too aware of the fact that some students simply cannot pay, and therefore think that some amount of subsidization is inevitable.
It gets trickier still, because you will almost certainly have to spend more resources on those students who will need subsidization. They are, other things held constant, likelier to need more intensive training in getting the quality of their writing up to the same level as that of other students, simply because they are likelier to not have had the same exposure to quality education in school. And this will apply to other dimensions as well: quantitative skills, the luxury of having time to practice their skills and so on.

https://econforeverybody.com/2021/07/09/the-almost-ideal-university/

That is, the economist in me is saying that students from poor or underprivileged families will need more intensive training and help, educating them in the AIU will be more expensive. But that still doesn’t explain the how of it. Sure, it’ll cost more, but for doing what, exactly, and how?

There are some potential answers (bridge programs, extra assignments, more mentorships) but I’m hazy on the details right now.

Would I be correct in saying, however, that if we don’t solve this problem within the university itself, the student will face an ever tougher challenge out of it? That is, an underprivileged student who doesn’t get the kind of education we are speaking about right now will find it even more difficult to succeed out in the real world – is that a reasonable hypothesis? And if yes, then it becomes even more imperative to ensure that we work towards ensuring that these students get the kind of learning that we are speaking about?

Food for thought, for sure, and I’ll be feeding at this trough for a while. 🙂


Thank you, to Professor Nigam, for an excellent set of thought-provoking questions!

And a request to all of you – please help by letting me know what makes sense, and what doesn’t when it comes to the Almost Ideal University.